The study empirically examines the effect of energy prices on economic growth within the ECOWAS sub-region. Acknowledging that the effect of energy prices on growth is quintessentially indirect and hence can be tracked through some channels, the study thus investigates this using the System Generalized Methods of Moments (GMM) estimation technique for the period spanning 2000 to 2015. The results indicate that the overall effect of energy prices on economic growth is significantly negative. This effect propagates mainly through government consumption expenditure and investment, albeit its effect through real interest rate is positive. In other words, energy price drives real interest rate down which promotes growth. However, its negative effects on government consumption, investment and exchange rate significantly overwhelm the positive effect from real interest rate. Thus policies geared towards finding alternative energy sources and domestic energy use would be beneficial because of the region’s quest to achieve a long term sustainable growth.

Description:

A thesis submitted to the Department of Economics,
in partial fulfillment of the requirements for the
award of Master of Science degree in
Economics, 2016.